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Peak oil review – July 12

July 18, 2010

From The Post Carbon Institute

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2. The Deepwater Horizon Saga
Developments: After a two-week delay caused by bad weather, BP appears to be on track in its efforts to install a new cap on the Macondo well. If all goes well, a big IF, all the flow could be captured and piped to the surface for disposal by the end of the week. There is even a possibility that the new cap may be strong enough to contain the flow should a hurricane interrupt surface operations before the relief wells have sealed the hole. The scheduled date for permanently stopping the leak is still mid-August, but if all goes well this could happen before the end of July.

In the meantime, the old cap has been removed as preparations for installing the new cap are being made and nearly all of the oil flow is spilling directly into the Gulf.

The economic impact: With the end of the leak in sight, attention is turning to the government‘s six-month moratorium on further drilling. Even though a federal appeals court upheld the lower court‘s decision to allow drilling to resume, companies drilling in the Gulf are reluctant to resume operations until the government officially gives them the go ahead. The administration is currently preparing revised drilling rules which should be announced this week.

In the meantime the political furor over the spill and drilling moratorium continues on numerous fronts. A dispute has broken out over the competence and ideological leanings of President Obama‘s commission investigating the spill. None of the commission members have any experience in petroleum engineering and some have already spoken out against offshore drilling. In the meantime, the EIA estimates that a six-month moratorium will cut Gulf oil production by 31,000 b/d in the fourth quarter and by 82,000 b/d in 2011.

The EU‘s Energy Commissioner has come to the administration‘s aid by recommending that European countries stop issuing deepwater drilling permits until the results of the investigation are known.
Environmental impact: The US Navy has started low-level blimp patrols over the region of the oil spill looking for slicks and distressed wildlife. Scientists are still debating the spill‘s ultimate impact on the Gulf. Some say the spill‘s effects will pass quickly while others fear the Gulf‘s already fragile ecosystem will be pushed over the brink, causing serious long-term damage to the seafood industry.

The future of BP: With the total cost and liabilities of the blowout now estimated to be upward of $30 billion, rumors are rampant about what will happen to BP. Anadarko Petroleum, which owns 25 percent of the Macondo well, is refusing to pay for its share of the cleanup saying the whole disaster was caused by BP‘s reckless behavior.

BP executives have been running around the Middle East in an effort to raise money from sovereign wealth funds by selling off a stake in the company, possibly to Abu Dhabi. The papers are full of reports about what BP will or will not do. Selling off assets, including its stake in Alaska Prudhoe Bay for $12 billion, is a popular theme. BP has denied a Sunday Times report that a takeover by Exxon is under consideration and insists it can stay afloat without new cash to pay for the oil spill.

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From The Post Carbon Institute

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